Firstly, any damage that deals 1k damage or less is reduced by 20%(the physical part at least). Don't ask me which part of the damage calculation process that kicks in at. That's just what Nijlo said.
Secondly, I support damaging armour. Make it so if you can put up some crafting components, the repair time goes down(should not be more than 1 Nodekian day though, IMO). Other thoughts: If you have to give the armour to the NPC to repair, then you have to account for reboots. Otherwise, have it kept in inventory(or saved in a new subsection of the player file, like "Undergoing repairs: A Bayeshi Coat of Arms(cracked/dented/broken)") for certain period(24 hours RT tops?) till it's repaired.
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